New Mass Termination Claim Certified in Ontario

by Bennett Jones LLP
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On January 2, 2014, Justice Perell certified a class action alleging that, among other things, a group of over 500 putative class members had been wrongfully dismissed by their former (now insolvent ) employer. Justice Perell’s decision in Brigaitis v. IQT Ltd., c.o.b. as IQT Solutions  comes on the heels of a flurry of employment-related certification decisions focusing almost exclusively on claims pertaining to eligibility for overtime pay . Accordingly, it is one of only a few recent decisions from the class action bench in Ontario to address the certification of mass wrongful dismissal actions.

The action in Brigaitis was brought on behalf of a group of former employees whose employment with IQT Solutions, a telemarketing firm, had been terminated after the company commenced insolvency proceedings in the U.S. and Canada in 2011. The action, which named the company and its directors, followed allegations in the U.S. that executives of the company had mismanaged and misused funds for their own personal benefit and had done so during periods in which they ought to have known the company was insolvent or approaching insolvency The putative class members sought damages for wrongful dismissal, negligence, conspiracy, inducing breach of contract, oppression and breach of fiduciary duties.

On certification, the proposed class was vigorously challenged by the defendants on the basis that a large number of class members had already obtained relief under the Ontario Employment Standards Act, 2000 and in proceedings before the Ontario Labour Relations Board. The defendants argued that section 97 of the ESA barred over 70 percent of the class from advancing civil claims for wrongful dismissal. The defendants likewise argued that the other causes of action advanced by putative class members were properly viewed as disguised claims for the same wrongful dismissal damages that a significant portion of the class were barred from pursuing, and brought a corresponding motion to strike the claims.

In his reasons, Justice Perell categorized the putative class members into three groups: (i) the “Section 97 Group”, consisting of individuals who had filed a complaint under the ESA; (ii) those who had been assessed by the Ministry of Labour under the ESA on a non-voluntarily basis; and (iii) members with no ESA claims. Ultimately, Justice Perell declined to entirely exclude the members of the Section 97 Group (the largest group by far, made up of 236 former employees), finding that although they could not pursue damages for wrongful dismissal, they were free to advance claims for negligence, oppression and inducing breach of contract alongside the remaining class members. Justice Perell likewise declined to exclude the second category of class members who he found had not voluntarily sought relief under the ESA, from any aspect of the claim. Rather, Justice Perell held that section 97 of the ESA, by its express wording, referred to individuals who filed claims and thus did not oust these claimants’ ability to pursue wrongful dismissal actions. Although they may have already received some compensation, Justice Perell noted that there would be ample opportunity to offset earnings received in the individual damage trials that would be necessary to determine damages for the wrongful dismissal claimants.

Justice Perell went on to acknowledge that the quantum of damages for the other causes of actions advanced might overlap or be commensurate with the damages claimed for wrongful dismissal, but still declined to accept the defendant’s argument that the remaining claims were properly viewed as “disguised” wrongful dismissal claims. Rather, he found that, with the exception of the breach of fiduciary duty claim (which he found to be improperly advanced pursuant to New York law), all of the remaining claims could be certified as free-standing claims for wrongdoing that arose before the wrongful dismissal, notwithstanding an express acknowledgement that the defendants had a “strong argument” that class members could not advance an oppression claim.

This case, combined with the recent overtime class actions, suggests to us that the plaintiffs’ bar is refocusing its efforts on employment class actions and these claims are likely to certified even where the plaintiff class has been awarded some compensation.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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